Commercial Loans and Fun Blog

Even Small and Regional Commercial Banks Have Cut Back Sharply on Commercial Real Estate Loans

As the sponsor of the C-Loans Commercial Mortgage Lender Databank, we have our fingers on the pulse of the commercial real estate lending market. The CMBS lenders started to die late last year and now they are not lending at all.

Most of the mega commercial banks got crushed in the subprime residential lending debacle. Their balance sheets are so underwater that they are making at most 2% of their 2007 volume of commercial real estate loans. Essentially the mega-banks are out of the market.

Until this last week, however, the smaller banks were still making some commercial real estate loans.  We were greatly disturbed last week, however, when several smaller commercial banks - lenders with no exposure to the subprime crisis - contacted us and confided that their balance sheets were so troubled that they too had stopped making any commercial real estate loans.

We are pretty sure that this is a trend that will continue among the surviving small and regional commercial banks. As their commercial loans to local industrial companies start to go bad (sales of widgets and other industrial products are cratering), soon most commercial banks will stop making commercial real estate loans completely - even permanent loans on standing commercial properties.

If any of your "A" borrowers are delaying their plans to pull equity out of their commercial properties, tell them that this is the last call for commercial loans from banks. If they don't close their loans in the next 90 to 120 days, they may have to wait five to ten years before commercial loans with decent interest rates reappear.

If you need a commercial real estate loan right now, please click here.

September 23, 2020

Below is the Advice I Gave To 
a Struggling Commercial Mortgage Broker

After writing this blog article waaay back in 2008, I actually sat down and wrote an entire training course devoted to keeping new commercial mortgage brokers from making the same bone-headed mistakes that I cluelessly made forty years ago, when I first entered this industry.  I call it my Practice Course, and I consider it my finest work.  It contains over sixty lessons.

 

 

 

 

Here’s my advice:

1. Stick to small commercial permanent loans. Do not work on anything larger than $3 million unless you have a special relationship with the borrower (former client). Small commercial loans are the ones that close and feed your family.
   
   
2. New commercial mortgage brokers almost never close large loans. Why would a filthy rich investor with perfect credit and millions of dollars in equity work with a mortgage broker who is obviously new to the business? He'll spot the new broker's inexperience in the first few minutes of conversation. So the large deals that new mortgage brokers get are almost always hopeless. And even if the perfect, large deal ever did fall in their laps (one chance in a million), most new brokers don't yet have a personal relationship with the top loan officers at the huge banks. These top dogs are very, very, VERY cliquish. They don't fight hard in Loan Committee for newbies. So don't waste precious time trying to place large loans ... unless you have 18 small commercial permanent loans in process that will feed your family.Give me a $300,000 lead over a $30 million lead any day!  Small deals close. Large deals waste your time.
   
   
3. Do NOT waste precious time working on construction loans. The world has more enough homes and commercial buildings right now. Ninety-nine percent of the time, when a developer approaches a mortgage broker for help placing a construction loan, the developer does not have enough cash into the deal to qualify for a construction loan. He can't cover 20% of the construction costs. Do not work on construction loans! The deals you want are the permanent loans and the bridge loans.
   
   
4. Never waste a minute on international loans. They never close.  Ever. Ever!  There is a huge tax issue.
   
   
5. Read my blog daily for tips. http://www.blog.c-loans.com.  Go back and read all 100 of the old articles.
   
   
6. Build a databank of referral sources (commercial brokers, residential mortgage brokers, bankers, property managers, estate planners, etc.) and advertise to them by snail mail or email regularly.  Pepper your newsletters with TONS and TONS and even more TONS of jokes and fun stuff.  Condition your referral sources to look forward to your emails.
   
   
7. Your newsletter does NOT have to fancy.  A funny pic (see above), along with your signature block, with the words, "commercial loans" prominently displayed, will work just fine.
   
   
8. Learn how to create your loan packages using PDF’s.  This saves on shipping and allows you to submit a deal to multiple lenders in seconds.
   
   
9. Start buying leads from C-Loans. They’re only around $2 apiece (plus 37.5 bps. on closing). http://www.c-loans.com/leads.html
   
   
10. Get a signed fee agreement on every deal, but don’t ask the borrower to sign it until you’ve run him around for weeks fetching documents.  Wait until the borrower is desperate and hungry before presenting your agreement.
    
    
11. Don’t waste time working on deals with a low probability of closing.  Instead, use every free minute to meet new bankers and commercial brokers (realtors).  Add them to your email list.
    
    
12. Realize that your closing rate will never exceed 30%.  This means you need to have 15 to 18 loans in process at all times. Do you have 18 loans in process right now?  If not, get busy building your email list.
    
    
13. Only work with strong loan officers.  Loan Committee is a process where the decision-maker almost always says, "No", initially.  Then the loan officer has to use logic, fundamentals, oratory skills, and strength of will to push the deal through to approval.  If the loan officer at the bank who has your deal sounds and acts like a wimp, ask for the package back and then submit the same deal to a stronger loan officer at the same bank.
    
    
14. Grasp the concept that commercial lenders make loans for their friends. Become buddies with the top loan officers at various banks.  They will then fight for your deal in Loan Committee.  This may be my most important tip.
    
    

Learn the business! If you truly know how to underwrite commercial real estate loans, you won't waste countless hours working on hopeless deals.  Hundreds of graduates of my commercial mortgage training course now earn more money than the average physician.  You'll learn an entire profession for a lousy $499.  Hellooo?  Is this a trick question?*

 

 

 

Need a lender for your commercial deal?  You can submit your commercial real estate loan to to 750 commercial lenders in just four minutes using C-Loans.com. And C-Loans.com is free.  Click here.

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*  I always loved that line.  It comes come from the Ghostbusters II movie, when a demon possesses the body of a very young (40 years ago) and beautiful Sigourney Weaver.  Sigourney is laying on the bed seductively, and she asks the whacky Bill Murray, "Do you want this body?"  Bill turns to the movie audience and famously replies, "Is this a trick question?" :-)